The National Association of Realtors reports sales slumped 9.7% from April to a seasonally-adjusted annual rate of 3.91 million in May. Overall, sales fell year-over-year, down 26.6% from a year ago (5.33 million in May 2019).
Cheerleading by Yun
“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Lawrence Yun, NAR’s chief economist. “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”
By Region
- Northeast: May 2020 existing-home sales in the Northeast fell 13.0%, recording an annual rate of 470,000, a 29.9% decrease from a year ago. The median price in the Northeast was $327,900, up 7.8% from May 2019.
- West: Existing-home sales in the West fell 11.1% to an annual rate of 720,000 in May, a 35.1% decline from a year ago. The median price in the West was $408,400, down 0.2% from May 2019.
- South: Existing-home sales in the South dropped 8.0% to an annual rate of 1.73 million in May, down 25.1% from the same time one year ago. The median price in the South was $247,400, a 2.1% increase from a year ago.
- Midwest: Existing-home sales decreased 10.0% in the Midwest to an annual rate of 990,000 in May, down 20.2% from a year ago. The median price in the Midwest was $227,400, a 3.0% increase from May 2019.
Cyclical Low? But Then What?
It remains to be seen if housing declines again in June, but Yun is likely correct that May represents the bottom or close to it.
However, talk of a big blast higher based on the economy reopening is more than a bit questionable.
Are these People Buying a Home?
Questions for Lawrence Yun
- For two months, 30% (mostly renters) failed to make their housing payment. Are they potential buyers?
- Over 20 million people are recently out of a job. Are they potential buyers?
Diminishing Pool of Potential Buyers
1A: For details on point number 1, please see 30% Failed to Make Housing Payments in June
2A: For details on point number 2, please see Continuing Unemployment Claims Tell a Bleak Story.
Given the huge decrease in potential buyers it is more than a bit unreasonable for Yun to suggest positive year-over-year existing home sales any time soon.
Mish
Mortgage Application Surge
Year-on-year, applications to purchase a home were 21 percent higher and refinance ones surged 106 percent.
Check out a 1-year or 5-year line chart for an amusing trend.
This weekly data is bullshit.
I would love for someone to show me an example of a recession with 20% unemployment where the end result was higher property values……..
we have limited listings and those that come up are selling – yes at YESTERDAYS PRICES
seems we have INFLUX of bluecoats again
pretty soon we’ll be speaking language of mexifornia
Anecdotally Mish, I’ve seen both those groups buying homes/looking to buy within the last two months.
neighbor took a voluntary 10% pay cut to wfh permanently and is also collecting the 600 extra per week, owns two homes and rents one, looking to buy another and also rent the current one. He asked for forbearance on both mortgages even though he nor his wife lost jobs.
two 30ish couples with one person unemployed laid off permanently have both bought first home/upsized.
You can’t make this up, I wish you were right as i have been stacking cash waiting for the market to cool but I think this party lasts at least two more years at this rate.
If he’s earning (above-board, visible) money AND collecting the 600 UI boost, he will most certainly be paying all of that money back. You might want to let him know.
New home sales ripped higher. The TDS is inflaming your frontal cortex. White Flight Mish can’t even understand his own impact on the situation. People leaving the cities will stimulate new home demand.
The Tampa Bay area is hit hard.
“Pinellas’ sales were down 46 percent compared to May 2019, while Hillsborough saw a 28 percent drop and Pasco slipped by 32 percent…
Also unlike April, these drops affected nearly every price range…”
And perhaps most interesting:
“Local Realtors attributed the drops both to sellers’ hesitancy to allow strangers to tour their houses as well as buyers’ fears about financial stability.”
B_MC, interesting that it would be across all price ranges here when nationally the higher the price the less likey it is to sell. I know where I am NEW CONSTRUCTION is selling as if nothing were different. While existing houses were yanked from the market in droves. It does seem to be normalizing again, but down in the Tampa St. Pete CBD they are struggling and imposing harsher face mask rules even as they reopen. I had to close on my house in April signing the documents on the truck lid of the car the title company lady was driving. 🙂
Shockingly bad take by Mish. Low rates, demographic tailwinds, move to suburbs, apartments to homes (office for WFH).
Check out mortgage apps and google search trends on homes for sale. V shaped recovery in the home market.
shocking silly reply
Demographic headwinds
Boomers are retiring and downsizing , millennials have different values than boomer parents
Explain these then.
In the past month, google searches for homes are the highest they have EVER been, including 06-07.
Last 5 years: https://trends.google.com/trends/explore?date=today%205-y&geo=US&q=homes%20for%20sale
“Purchase applications increased to the highest level in over 11 years and for the ninth consecutive week. “
Long time reader of yours for many years, just think you’re off on this one.
Good Lord
They are comparing purchasing applications for just a single week compared to that week a year ago.
Year-on-year, applications to purchase a home were 21 percent higher and refinance ones surged 106 percent.
It is totally absurd.
Check out a line chart here to see how absurd the comparison is.
Well of course they are.
That’s how “year over year” works.
Here is a better chart from Calculated Risk that shows the unmistakeable V this year.
Lumber prices are up 20% in last few weeks, 75% since the low.
Zillow traffic at all time high.
That’s 4 data points now.
Temporary distortions caused by some pent-up demand and A LOT of economic shortsightedness by greater fools. The headwinds will soon overwhelm the distortions.
This article below draws a lot from Black Knight. I think your google trends data is most likely due to people looking to find something to downsize too because they can’t afford what they have. Or could just be people day dreaming since they’re not working. Either way the obvious trend is a significant fall in housing.
Heres an excerpt:
If readers didn’t know, a repayment of forbearance is usually in one lump sum at the end of the six months. So it’ll be around the fall season when borrowers will have to pay back the owed money.
Repayment could be a serious problem for many, which could lead to a wave of forced selling. The forbearance has only delayed the downturn in the housing market – as the worst has yet to come
“V shaped recovery in the home market.”
…
You will eat those words.
It’s a slow moving train wreck. Expect more “help” for “home owners”.
But at the end of the day a 75 year old track shack with a “makeover” is not worth 500k, but thats what they’ve been selling for here in N Cal…just ridicules. Thats 30k a year (mort, ins and property tax) for 30 years if you had 20% down. Then there’s EVERYTHING else that needs to be paid for to make your life “go”.
Theres no way this ends well.
Yes Russel, I saw an 1,100 sq ft 2 debroom one bath “house” on a small lot in Santa Rosa listed for $770,000 and it was indeed right adjacent to the tracks of the new commuter trains. What a flop that has been. Had BART been allowed to run through Marin back when it was being built in the seventies Santa Rosa would be close to the size of San Jose and Silicon Valley might have ended up in the North Bay instead of down below the airport. That little house was being marketed as an upscale Tiny Home.
But, is that a statement about the actual quality of the house? Or the actual worth of 770,000 FRNs? Where I ended up buying was about an hour north of Tampa rather than an hour north of San Francisco even though I am from northern California and have always loved the North Bay, I left California in 1992 permanently simply because the only people that can afford to live there are people with trust funds, lottery wins, or who bought real estate before 1985. If you were like me then there simply was no way to break into the real estate market after that 1981-1985 dip in prices induced by those extreme interest rates Volker imposed in order to kill inflation.
So, I went back to college for my finance degree in Ohio, then lived back east for a few years. Then out west again but this time in far southern Oregon. That place was infected with high prices as Californians sold up and bought houses for cash in Oregon and either bought two or three more as rentals, or put the balance into interest bearing accounts as a retirement fund. So much so that this house I bought in April for $257k would have been 650-750k back in Oregon, if I had to look at houses only in the $257k range in Oregon I would be a long time waiting to buy, we are talking a double wide on half an acre outside of town that needs rehab.
I can understand why some people buy these things, they are still cheaper than rent, they allow you to live a tolerable distance from high paying jobs without having to actually sleep in a tent. Monthly mortgage does not rise while rents do. And people always think they can sell up for more later. Why not buy if you cannot lose money on the place right? I should have thought the GFC would have disabused the public of that myth, you can lose your ass and end up in BK and permanently out of the RE treadmill. A renter for life.
But my experience in Oregon just since about 2014 is renting can be far worse. My rent increased 90% between then and 2019. I was going to have to move like it or not, I had been priced out of Oregon as well as California now. And of course my COLA for my fixed income year after year was zero, zero, three tenths of one percent, 1.2% then 1.5%, even as real costs of living were skyrocketing. It is a very helpless feeling to watch as every month you have to find more to slash out of your monthly budget till there is very little left to slash. Then you start doing things like staying home simply because you can’t afford gas for the car.
That was an old people’s problem, but I see it coming to the general population soon. When working people have to find ways to get by on less every month old people will just die. And we are on the cusp of that, and might already have started.
It’s ALWAYS a great time!!!!!
LOL, I just wanted to look up what they were saying the last time PRE GFC real estate dropped back in the early 80’s when Volker raised the prime rate several times to 20% in order to crush stagflation.
I saw an article at REALTOR and you have to admit they are creative when it comes to spin. They had a story headline “80% OF TENANTS PAID RENT IN APRIL.” Rather than 20% did not.
“The majority of renter households—80.2%—made a full or partial rental payment for the month of April by May 6, according to the National Multifamily Housing Council.”
Wow, talk about cherrypicking dates to maximize the impact of the story, and I might also point out that April rent for all the 40 years I have rented was due April 1 not May 6.
I am not certain which way it will go. The market has remained very strong here in Minneapolis (despite the hundreds of businesses destroyed by the aholes during the protests.) It occurs to me that the unemployment rate isn’t as important a factor now as it might usually be. Here, and I think in most places, home prices requires you to be in at least the top 25% of household incomes to buy. To my knowledge the vast majority of those laid off are all the average schmucks in the bottom 50% (said with affection.) They probably wouldn’t be buying anyway, at least not in the twin cities. FWIW.
They might not buy, but they do rent, and when they fail to pay (or are permitted by the government to not pay), then becoming a landlord becomes a MUCH less appealing proposition and rental property prices must reflect that fact at some point. Those rental properties can and will serve as comps to many non-rental properties, and in my opinion, they could in fact drag down the market as whole.
Lawrence Yun is the worst economist I have ever heard.
His never-ending motto….”There’s never been a better time to buy”
Go back to 2007 and see his advice. LOL!
Worse than Larry Ludlow?
I tell you, he’s really a comedian. It’s that many people take him serious, when he’s only having fun. I’m sure of this…
I’m hoping someone can clarify this. Assume a renter or homeowner skips a payment, which they legitimately can in many places. Will this show up on their credit-rating reports, or are these missed payments not allowed to be reported.
It does not ding their credit – or at least is not supposed to
My understanding
The forbearance programs being offered should only be used as a last resort, after borrowing from friends, family, 401k, signature bank loan (if possible). True, a person will not be reported delinquent, but they will be reported as being in forbearance and lenders view that as derogatory credit. Fannie/Freddie will allow a refinance if the loan is brought current. Non-conforming lenders all have different rules, but most are designed to protect the bank from lending to a “risky borrower” that doesn’t pay their obligations. Besides this obvious impediment to borrowing, several of the top non-conforming (jumbo) lenders have introduced rules designed to restrict borrowing. BofA requires 30% down on loans over $1m. Wells Fargo requires $250k in deposits for a refinance in addition to refusing to use income from rental properties to qualify for financing. Reserve requirements are rising and home equity loans are becoming difficult to obtain. Their are more hurdles to clear now than just three months ago.
I live in Colorado Springs and the market here was insane. Now there are lots of homes with fairly decent price cuts. The one next to my rental has sold 4 times, but the buyers cannot close the deal.
Personally I would not buy a house at this time for multiple reasons.
Not to mention the upcoming election where income taxes will soar if it’s Biden. Also real estate taxes will jump to make up lost sales tax income. I think sitting tight is a good move. I am low balling current listings. Some people just must sell due to a myriad of life’s issues.
I live in Denver.
So far, the data do not show much damage. DoM is still 28 days. Closing prices are still very close to asking prices.
Banks taking it on the chin again in this miserable permanently collapsed economy, which means a massive multi TRILLION (with a T)TARP 2 bailout on top of the trillions doled out to the banks and Wall Street over the last 7 months! Fed will need to cut the banks another check for a least $2tril just as a down payment! Add at least 3 more tril $$ bid to cover CRE/REO’s as the cherry on top!
tend to agree, BUT….it may not be wise to look at stats from one side; there’s supply also. What is it doing?
Prices are up here in the bay area with declining inventory and sales. Rents are starting to fall. San Francisco is experiencing a mass exodus of tech workers. My guess is home prices are soon to follow.
May benefited from the Calendar Effect.
5 Fridays in May. Most like to close on Friday (mortgages are prorated at closing) and move on the weekend.
May also had the benefit of V dancing in many eyes + plenty of stimulus sloshing around.
In the months ahead as V vanquished and stimulus on the wane?